Robinhood Faces 90 Lawsuits as Congressional Hearing Looms
The trading platform heads to Washington on Thursday, cast as the villain in a story that took the financial world by storm.
Robinhood CEO Vlad Tenev will testify before Congress on Thursday, explaining his platform’s decision to abruptly suspend trading in GameStop and other volatile stocks during a retail investment rush in January.
Reddit CEO and co-founder Steve Huffman, Citadel CEO Kenneth Griffin, Melvin Capital CEO Gabriel Plotkin and influential online trader Keith Gill are also set to testify before the US House Financial Services Committee.
The purpose of the Thursday hearing is to give the committee a better sense of what occurred during the week of frenzied trading. Speaking with CNBC, MP Securities analyst Devin Ryan predicted that the hearing “will focus on understanding exactly what occurred during the week of service disruptions, making sure that all activity was appropriate and also determining how to avoid a similar event in the future.”
In the three weeks that have passed since Robinhood restricted trading in several equities at the centre of the buying frenzy sparked by investment forum r/WallStreetBets, Robinhood has been sued more than 90 times by investors claiming that the platform’s actions were unlawful.
However, it is unlikely that many of the aggrieved investors will receive a day in court, as a clause in Robinhood’s user agreement requires disputes brought by users to be settled in arbitration rather than the civil court system. There is potential for a class action lawsuit to move forward in spite of this, due to US regulations.
During an interview with Tesla CEO Elon Musk, Vlad Tenev described Robinhood’s decision as necessary to meet clearinghouse deposit requirements, and not an attempt to manipulate the market in favour of Wall Street short-sellers who were being squeezed.
Tenev dismissed claims that Robinhood’s hand was forced by partner Citadel Securities as “getting into conspiracy theories”.